French Housing "In Total Meltdown", "Current Figures Are Disastrous"

Tyler Durden's picture

If Venezuela is the case study of a country in the late stages of transition into a socialist utopia, then France is the clear runner up. The most recent case in point, aside from the already sliding French economy, whose recent contraction can be best seen be deteriorating PMI data...

... which hints at the dreaded "triple dip" recession, nowhere is the economic collapse in France more evident than in its housing market which as even Bloomberg admits, citing industry participants, is now "in total meltdown."

The reason? The belief of the socialist president that a few economists know better than the overall market, especially when the sanctity of the "fairness doctrine" and the greater good is to be upheld at all costs. To wit: "French President Francois Hollande’s government may have made a housing slump worse, pushing the construction market to its lowest in more than 15 years. Housing starts fell 19 percent in the second quarter from a year earlier, and permits -- a gauge of future construction -- dropped 13 percent, the French Housing Ministry said yesterday."

The reason: a law that was passed this year that seeks to make housing more affordable by capping rents in expensive neighborhoods. To protect home buyers, the law also boosted the number of documents that must be provided by sellers, leading to a decline in home sales and longer transaction times.

Of course, it didn't take long for the government to realize its mistake and to scramble to adjust the rules, but "the damage is done, threatening France’s anemic recovery that’s already lagging behind those of the U.K. and Germany."

Enter the soundbites: “Construction is in total meltdown,” said Dominique Barbet, an economist at BNP Paribas in Paris. “It’s difficult to see how the new housing law is not to blame.”

Barbet says the drop in home building lopped 0.4 points off France’s gross domestic product growth last year and cut the pace of expansion by a third in the first quarter. Expenditure in the sector was at its lowest level ever as a portion of total real GDP in the first quarter at 4.7 percent, down from 6.3 percent in the first three months of 2007, he estimates.

Sales of new-build homes fell 5 percent in the first quarter from a year earlier and are down by about a third compared with their level in 2007, according to Credit Agricole.

It's not just the government to blame, though: central planning, which has made the rich richer beyond their wildest dreams has pushed prices near all-time highs in the Paris are, making real estate inaccessible to all but the richest, and leading a crunch in new construction and the associated spending. This is further impacted by the country’s record jobless claims, which in turn is leading to a plunge in sales and profits at building material and electrical equipment makers including Cie. de Saint-Gobain SA, Lafarge SA, Vicat SA, Schneider Electric SE, Legrand SA and Rexel SA.

Enter more soundbites: "Current figures are worrying and will be disastrous if nothing is done; clients of the building sector are sounding the alarm bell,” Pierre-Andre de Chalendar, chief executive officer of Saint-Gobain, said this month. “It’s as though everything is being done to discourage investment in housing.”

Alternatively, it is as if everything is done by a socialist government to boost the economy. The outcome almost without fail is the same. Alain Dinin, chairman of property company Nexity (NXI), concurs.

“The French residential real estate market has been in a particularly tough situation,” he told investors after last week posting a drop in first-half revenue. “A host of complex regulations have been introduced and, most importantly, buyer sentiment has suffered. All those factors have combined to slow the already historically-low rate of new homes entering the market.”

The direct threat of this housing collapse is that the country's already lowered GDP forecast may end up sliding to 0%, if not negative:

Reduced home construction is threatening Hollande’s goal of increasing GDP by 1 percent this year. The International Monetary Fund slashed its 2014 French growth forecast to 0.7 percent this month from 1 percent previously. The IMF expects expansions of 1.9 percent in Germany and 3.2 percent in the U.K., as well as growth of 1.2 percent in Spain.


Hollande, who has been trying to revive an economy that has barely grown in two years, is grappling with a record 3.3 million jobless claims and an approval rating that’s at the lowest level ever for any French president.


Construction has the advantage of being an industry that’s easy to revive and lifts the broader economy by leading to the hiring of less-skilled workers and spurring private investment, economists say.


“A recovery in construction would help the rebound but it won’t happen without government initiative,” said Ludovic Subran, chief economist at Euler Hermes in Paris. Building is “a sector where the impact on growth and employment is felt immediately.”

Sadly, the underlying problem is one which even China has figured out has no solution, and where a housing sector saddled with insurmountable debt has only one short-term "fix" - even more debt to boost sales for another quarter or two, while kicking the can of the inevitable collapse a little further, assuring that the plunge, when it comes, will be worse than anything experienced.

In France, it is no different, and the "solution" is to do more of what has not worked:

State-controlled financial institution Caisse des Depots is starting talks with public and private investors to raise funds to build several tens of thousands homes in the greater Paris region, where the lack of available land and a rising population has boosted housing prices.


“If we invest public money and funds from the Caisse, we must lure private investors,” Caisse des Depots CEO Pierre-Rene Lemas said in a July 6 interview. “Some talks are starting with a view to conclude by the end of the year.” Sylvia Pinel, who replaced former housing minister Cecile Duflot in April, has also introduced measures to revive the construction market, and cut some rules to reduce construction costs.

At the end of the day, the only thing left is what has so far prevented the world from imploding since the Lehman collapse on the back of trillions in central bank liquidity: preserving public confidence at all costs.

“What is important for France is to reassure people, to reassure everyone who wants to invest and to restore confidence,” Lafarge CEO Bruno Lafont said in an interview with Bloomberg Television last week, calling for simpler rules, lower construction costs, and incentives for institutional investors to invest more in housing.

But, as Bloomberg summarizes it best: "It may be too little too late."

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
froze25's picture

Not unexpected, we will see further unraviling of the EuroZone.  Winter is coming.

hedgeless_horseman's picture



Real estate in France still seems very reasonable to me, compared to the USA, as long as you are not exposed to their income tax.

Par example:

4 bedrooms

168m2 habitable - m2 Terrace

3900m2 Land - Price 1.195.000 Euros,for-sale-villa-tourrettes-sur-loup,5...

813kml's picture

It could use some modern upgrades, like a tall pole from which to fly a white flag.

pods's picture

Don't the Chinese like French cuisine or what?


Excursionist's picture

Too many L's in names of French foods..

An order of sou-fray could be a challenge to place.

StychoKiller's picture

You're confusing Chinese with Japanese; Japanese has no equivalent to the letter 'L', but Chinese does.

Analyse2's picture


In fact this ugly disdain and pitiful jokes come from the firm refusal of the French to join America in Irak, in 2003.

Since France refused to go to Iraq, American warmongers and neo-cons made French army look like cowards – as a punishment.

But History has proved the French were right, and that the WMD were only a dirty trick to serve as a pretext.

Nevertheless, the hate of american warmongers against France remains still there, well alive, even in ZH.

This stale hate still shows through "innocent good jokes" about the “surrender monkeys” and their white flag … As for the rest, the French can be proud of their Military History which remains despite these stupid jokes by far the best military record in Europe.

walküre's picture

Can you afford the upkeep or is your family large enough? That's the bigger issue than the price. If they had a vinyard instead of the dreaded grass, it would be worth a fortune. I guess you could grow Artichokes if the water supply is good.

highly debtful's picture

Methinks HH is speaking in jest. 1.2 million euros is a prohibitive price for middle class Europeans. 

desirdavenir's picture

why not go to Lozère instead ? Sky in the winter, near the south coast, no boring neighbour, at half the price

foxenburg's picture

Asturias. better coastline, better mountains, better food, better house, better price.....

tonyw's picture

don't forget their annual property tax.

blinking tourettes blinking blinking:-0

it's all a case of location, cheaper and more expensive properties in both USA & France.

Occams_Chainsaw's picture

Let them build with cake....

The Longest Call's picture

Bring in Blackrock, not to worry...

Kirk2NCC1701's picture

Not surprising, given that the London market is doing the opposite:  Up, way up!

That's because London is "doing God's work"* and Paris is not.  /sarc

* Quote from GS CEO, Lloyd Bankfine

tonyw's picture

Also, so far no high annual property tax in London but this may change with the next government.

radiobomb's picture

''winter is comming'' ....... and perhaps Russian gas isnt.

Or is it ?   Wonder how the sanctions translate to the 2 aircraft carriers currently under construction for Russia by Fr...?

Analyse2's picture


France is far less dependant on gas and fuel than a lot of other countries. The French tend to prefer electric heating as 75% of their electricity is produced by their nuclear plants (USA 19%, UK 18%, Japan 18%, Germany 16%).

Using figures from 2012, Germany is the largest gas importer in Europe at 3065 billion cubic feet annually. Next is Italy with 2359 billion, then Britain with 1734, France with 1600 , then Spain with 1225 and Belgium with 1084 (half of which it uses itself and half it re-exports).



gdiamond22's picture

It is amazing how people believe in this Socialist crap. Would never happen in the USA....oh wait

Jackagain's picture

Sadly many people want the government to be their nanny & their god.

Manthong's picture

"Sadly many people want the government to be their nanny & their god."

Sadly many people in government want to be the peoples nanny & god.

zaphod's picture

What was exceptional about America was for a brief period in time it was one of the only groups of people to not think this way.

But then the early 1900s progressive movement started and within a generation a majority looked to government to fix their problems. America has not been exceptional for over a hundred years now, has spent the wealth created during its exceptional era, and is now going to see the true effects of losing what made it exceptional.

gdiamond22's picture

Exactly right.

Socialists/Progressives/Communists - they ALL are like tics, latching on to a healthy host; They  see a thriving capitalist society and feel the need to extract power from it, preying on the less fortunate; making empty promises; the government is here to help. Completely ignoring history that this always fails, but depending on the dumbing down of the citizenry to maintain power.

I fear the blood has been sucked dry and the host is on its last breath.

SofaPapa's picture

Yep.  When the US became independent, the colonists were a group of people who had self-selected to get themselves out of a system with this kind of dependence attitude and take the risk of settling a new land (this included kicking the locals off, but the point is the same).  This group was by definition interested in self-sufficient living.

As the settlements grew, however, the same old cancer returned.  People who wanted to depend on others to "protect" them, to "provide for" them, to "help" them.  We are now the same system that the colonists originally left.  This experiment cannot be repeated.  All parts of the world are now settled or in settlement.

Any solution at this point is going to have to be evolutionary within a given culture.  That's a much taller order.  I pray we are capable of it.

Anusocracy's picture

The individualists left the ant colony to develop a new land.

Once it was up and running, the ant colony followed.

And they are still coming.

tonyw's picture

over a hundred yearsago very few governments provided much

Citxmech's picture

If anyone has any doubt of this, check out the first pic here:

What a monument to our collective, commercialized, slow, suicide this clown is.  Does he even see the irony?

Kneel before your masters and praise them, eh? 

Al Huxley's picture

They should outsource GDP measurement and reporting to the US.  That would fix up their economy quickly and at very low cost.

Icewater Enema's picture

Just wait a month. They haven't finished adding up all the hookers and drug deals contributing to Eurozone GDP. As soon as they add that in, everything will be fine. Housing won't matter.

MidwestJester's picture

We haven't really been faced with the bill here yet....I'm thinking the cost may be more than expected :P

Magooo's picture

blabam's picture

Price controls work! Just ask the Fed. 

drink or die's picture

Need a good war to knock down all those old buildings, so the builders that are currently out of work can build new ones.  That should raise GDP enough so people can afford to buy housing (or at least a drastic population dropoff will cause prices to be more affordable).  Where is my nobel prize in economics?

Zero Govt's picture

You've read Krugman haven't you?

..where wealth is created by high explosives

yogibear's picture

The greater socialist deserves what they get.

Don't worry the US will be there as the Federal Reserve created housing bubble #2 in the over-priced areas.

jubber's picture

To be fair France is about the only Country where you can buy a house at a very decent price, say a 3rd of a UK however hard to come buy

Citxmech's picture

Just don't try and maintain it - the VAT taxes will kill you.

basho's picture

“What is important for France is to reassure people, to reassure everyone who wants to invest and to restore confidence,”

no doubt, that will do the trick. reassure people.

first you screw them by saving the banks and not the citizenry, then you put sanctions on RU and reduce the job mkt, then you reassure them. good plan

Al Huxley's picture

Maybe they could hire Draghi to give a quick speech on how rosy the French outlook is - he seems to have the gift.

_ConanTheLibertarian_'s picture

Reassurance that the people will be fucked once more.

NoDebt's picture

What France needs right now is some "hot money" flowing in from Asia to buy up everything in sight (over $1MM, of course) to juice the numbers.  Too bad they did that whole "we hate the wealthy and will take 80% of everything they got" tax.

Al Huxley's picture

That's not a bad idea, but I think it's more complicated than necessary.  What's really going on is far less important than what the media and government agencies SAY is going on.  They just need to improve their lying skills.

icanhasbailout's picture

France has a bright future as a Russian warship factory

Tachyon5321's picture

Thomas Piketty and Paul Krugman, two of the greatest polical economist of the 21st century must be so proud!

youngman's picture

Their wheat crop was terrible flowered from to much rain.....sorry Frenchies

813kml's picture

Frenchies will be fine, what's bad for wheat is good for frogs and snails.